South African Journal of Economic and Management Sciences, Vol 11, No 3 (2008)

The impact of post-merger cross-shareholdings on South African merger control policy

Chris Charter

Abstract

There is a concentration of EU and US standards in the South African economy. In addition, a number of large industries have been undergoing consolidation. As a result, the phenomenon of cross-holdings, both within and across industries, is not unusual. In cases where the level of cross-holding falls short of joint control, the competition authorities have at times sought to apply the co-ordinated effects doctrine or some variation thereof hoping to lessen potential competition. More recently, the Tribunal has also considered the possible unilateral effects of the acquisition of a minority stake in a rival. A number of cases has emerged that to a greater or lesser degree explores the impact of crossholdings and cross-directorships on the competitive behaviour of the firms concerned. This paper includes a review of some of these decisions with a view to determining whether any clear policy seems likely to emerge from the competition authorities. The authorities’ approach to date, reveals an evolution from reflex suspicion to a more reasoned, fact-based outlook. Cross-holdings and directorships are treated in the same way as any other evidence relevant to an analysis of a given merger. However, despite the Tribunal’s willingness to wrestle with various economic theories, the most recent decision suggests that the acquisition of a non-controlling cross-holding in a company may not fall under the analysis of South African merger regulation at all. Should that position change, following clarification by the Tribunal or an unequivocal ruling of the Competition Appeal Court, the body of case law goes some way to indicating the type and manner of analysis the authorities will employ.